Spain fact of the day

Now, if we look back over Spain’s “good” economic years, it is clear that even though growth between 1999 and 2006 was normally in the 3% to 4% range, most of this growth came from population increase, which was extraordinarily rapid, while productivity growth was miniscule, and even in the best of cases less than 1%.

And yet now the Spanish population is shrinking because of emigration:

In fact the negative movement in Spain’s population is accelerating and no one really knows how far this acceleration will go, or how long it will continue. What we do know is that the likelihood of Spain’s unemployment rate falling below 20% by 2020 is small (it is currently over 26%), and with such high unemployment the pressure to move will continue to be strong.

Of course protecting older workers at the expense of the young only makes this problem worse, since the young are more likely to leave.

As expected for a country that is Intellectual Property-lite–where else is productivity going to come from? A good post would be a refresher on how TFP (Total Factor Productivity) is measured. As I recall, it is ‘indirectly’ measured as a sort of residual ‘left over’ after accounting for all other types growth (such as population). I’ll say it again: the world needs to reward innovation more and better to get out of the Great Stagnation–now is the time, but sadly I doubt anybody will listen.

And for you Alex T types that says innovation should only be done in the USA and copied elsewhere, that’s fine, but you would have to support much greater access to the USA via immigration than is present now. You would have to promote an ‘automatic visa in 24 hours’ system rather than the laborious paperwork showing no American can do the job, etc, as now in place.

And for you Alex T types that says innovation should only be done in the USA and copied elsewhere

I don’t remember seeing such an argument. In any event, I don’t grasp your point either. Are you saying that the only place innovators can innovate is the continental US? Do we put something in the water over here? Maybe you could try that.

Now, to ye of little faith, it may look like our policy of massive immigration failed in Spain. But, I say unto ye, the only failure was in our faith in immigration’s ability to cure all. We must the gates even wider!

In order to understand what happened to Spain over the past decade or two, one must also consider the type of immigrant Spain attracted.

It does not appear that Mr. Hugh addresses this issue in his piece on Spain. Prior to the housing bust there were a number of UK television reality programs chronicling persons who would follow their dreams by picking up stakes in the UK and moving to sunnier climes. As UK housing prices (and the Sterling) soared, British subjects were selling their homes and moving to relatively cheap places like Spain, perhaps enchanted with that country after a low-cost charter to inebriate themselves on the Costa Brava. If the personalities on the show were representative, and I think they largely were, these folks arrived with unrealistic dreams and few skills. A typical couple might dream of making a living in Spain by opening a restaurant (not having any prior experience), a nail salon or even more hare-brained schemes. Of course, they drove up the housing prices in Spain, but many of them didn’t make it, which gave these shows a sort of comic/tragic pathos. I suspect that most of these migrants to Spain detracted rather than added to the productivity rate. Others were retirees, who obviously contributed to GDP, but not to productivity. Per Wiki:

“British migration to Spain has resulted in Spain being home to one of the largest British-born populations outside of the United Kingdom. Migration from the UK to Spain has increased rapidly since the late 1990s and the British population of Spain in 2006 was estimated to be about 761,000 (more than twenty-five times the population of Gibraltar).[1][2] Of these, according to the BBC and contrary to popular belief, only about 21.5% are over the age of 65.[3]”

I suspect the immigration pattern from other EU countries followed a similar pattern (not to mention illegal immigration from North Africa). Most folks moving to Spain during this period were not going there with job skills to pursue serious work; they were going there for sun and fun or perhaps to escape squalor elsewhere. Now that the pattern is reversing itself, I would not be surprised if productivity were to increase.

One simply can’t consider immigration policy and the effect on a country’s economy without considering the quality of the immigration population one is seeking to attract. I noted that Mr. Hugh is a British subject who moved to Barcelona about 15 years ago—I trust that in this case he is the exception who proves that rule.

Spain’s productivity never went up because the employee/employer relationships are broken: It’s all about short term exploitation, in both directions.

In such a low trust society, the only way up is through connections that aren’t really work based: Loyalty to family and friends. If you work for a random employer, becoming the friend of your boss is far more important than being productive. In the same vein, sales are all about trust and not quality or price.

When that kind of signaling is so important, of course you get no productivity increases: your people are using their energies innovating in all the wrong ways. That mentality is just doesn’t mesh well at all with classic northern european values, and makes the entire country uncompetitive.

This has been the case for many years: Opportunity was only there for those that entered the labor force right around the time Franco passed. The ambitious ones have been leaving the country since the 90s, where it became clear that most roads that were open to their parents were closed to them.